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Tribal fighters who have been deployed onto the streets, patrol in the Iraqi city of Falluja in January, 2014.Reuters

As the world watches with growing alarm at the violence and instability in Iraq, the rising price of crude oil is creating its own concerns: The price of West Texas intermediate, the U.S. benchmark, has risen about $5 (U.S.) a barrel in recent days, crossing the $107 threshold. That's great for energy stocks, but should investors be worried about the impact on consumer confidence and spending?

Probably not. For one thing, the price of oil has been rising throughout much of the past year, largely on encouraging signs for global economic growth rather than interruptions to supply. Consider that crude oil is up about $20 a barrel, or 23 per cent, over the past 12 months – making the latest threats to Iraq's oil production look relatively minor by comparison.

James Hamilton, a professor of economics at the University of California, San Diego, and a blogger at Econbrowser, offers two other points to suggest that the situation in Iraq may not be a big threat to global markets.

For one thing, hopes for Iraq's oil production are probably overstated. The country has said it would be producing 12 million barrels a day by 2017 – or about triple what Iraq was able to produce at its peak production levels more than 30 years ago – but Mr. Hamilton has his doubts: "To describe those plans as 'ambitious' seems too gentle a criticism," he said.

What's more, most of the increase in production (all but 200,000 barrels a day) was to come from areas in southern and central Iraq, or away from areas that are now controlled by Sunni extremist militants. As for current production, just 10 per cent was exported through northern Iraq and the main oil field in Kirkuk is now controlled by the Kurds, who are battling the extremists.

Still, these are delicate times for oil production, given the geopolitical issues in Libya and Syria – and a wider conflict in Iraq would disrupt another 3 million barrels a day in production. Mr. Hamilton estimates that this nightmare situation would send the price of crude oil above $150 a barrel.

But he's not so sure that the U.S. economy is particularly vulnerable to another oil price spike. Vehicles are far more fuel-efficient today than they were as recently as 2006. "Another oil price spike in today's environment is unlikely to have the same shock potential for the U.S. auto industry as it did the first time gasoline prices went to $4 a gallon," he said.

As for consumers, the retail price of gasoline is below recent highs, suggesting that a modest uptick in the price is unlikely to push consumers into different spending patterns, Mr. Hamilton argues.